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Canadian malting barley premium slumps - boosting export appeal

News06 Nov 2017by Mike Verdin

Malting barley premiums in Canada have slumped to well-below-normal levels, opening up the chance for unusually strong exports, thanks to a harvest better on both quality and quantity than initially expected.

Malting barley growers, used to receiving a “significant premium” for their crop over values of feed supplies, have seen the price gap narrow to well below the Can$2.00 per bushel typically received.

The malting barley premium for 2017-18 “has dwindled to Can$0.25 per bushel in some locations”, the US Department of Agriculture’s bureau in Ontario said.

“By comparison, the malt premium in 2016-17 ranged from Can$1.50-3.00 per bushel.”

‘Ample harvest’

The weakness in the premium reflects “ample harvest of malt quality barley”, the bureau said, estimating Canada’s overall barley output this year at 7.60m tonnes – 350,000 tonnes above the USDA’s official forecast, although still below last year’s 8.78m-tonne crop.

Despite weak rainfall levels for much of the summer in the Prairies, as in the northern US spring grains belt, the Canadian barley yield this year is “expected to be in line with the five-year average, because of good subsoil moisture reserves”, the bureau said.

And it reported at “just over” 2m tonnes the proportion of Canadian barley which would be used for malting, in both export and domestic markets, equivalent to well over one-quarter of production.

According to the Canadian Grain Commission, the proportion of the country’s barley crop making malting grade is typically about 20%.

‘Extraordinary’

The bureau’s estimate of a 7.60m-tonne Canadian barley crop is also above the figure from AAFC, Canada’s farm ministry, which estimates output at 7.31m tonnes.

However, it tallied with an estimate from Evergrain, the specialist malting barley house, which said that the final figure could end up marginally higher.

“But what is really surprising is the amount making it to malting barley, which is extraordinary, especially high,” Evergrain managing partner Matthias Wree told Agrimoney.com.

“Because of that, the malting barley premium has reduced.”

Export prospects

Still, prospects for Canadian prices might have been worse were it not for poor harvests in some other countries.

Mr Wree, while reporting that recent rains had improved prospects for Australia’s barley harvest, said that “Europe has not much [malting barley] to offer” for export, while saying flagging “a question mark over Argentina”, where grain crops have been exposed to excessive rain in many areas.

The dynamics, coupled with a downturn in demand from the US, mean that Canada will “export malting barley to countries it has not reached in recent years”, he said, questioning as potentially low for a USDA bureau estimate of overall barley exports of 1.55m tonnes this season, a four-year high.

“Certainly, Canada will be exporting a lot of malting barley, but I am not so sure of the feed market.” He said.

China’s appetite

The bureau itself said that “increased Chinese demand for feed and malting barley could offset some of the decline in US demand.

“China, now the world’s largest beer market, has been increasing imports Canadian barley since 2011, and took 66% of Canada’s barley exports in 2016-17, up from just 26% five years earlier.”

Other sources have told Agrimoney that China has already ordered about 800,000 tonnes of Canadian barley for 2017-18.